<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].

                   For the fiscal year ended December 31, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          For the transition period from __________ to __________.

                         Commission file number 0-19770

                            IEA INCOME FUND XI, L.P.
             (Exact name of registrant as specified in its charter)

           California                                    94-3122430
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

         444 Market Street, 15th Floor, San Francisco, California 94111
          (Address of principal executive offices)            (Zip Code)

       Registrant's telephone number, including area code (415) 677-8990
          Securities registered pursuant to Section 12(b) of the Act:


                                               Name of each exchange on
     Title of each class                           which registered
     -------------------                           ----------------
       Not Applicable 

          Securities registered pursuant to Section 12(g) of the Act:

                     UNITS OF LIMITED PARTNERSHIP INTERESTS
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]     No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant is not applicable.

<TABLE>
<CAPTION>
                                               Documents incorporated by Reference
<S>                                    <C>
PART I
Item 1 - Business                      Prospectus of IEA Income Fund XI, L.P., dated December 14, 1990
                                       included as part of Registration Statement on Form S-1 (No.
                                       33-36701)

                                       Certificate of Limited Partnership of IEA Income Fund XI, L.P.,
                                       filed as Exhibit 3.2 to the Registration Statement on Form S-1
                                       (No. 33-36701)

                                       Form of Leasing Agent Agreement with LPI Leasing Partners
                                       International N.V., filed as Exhibit 10.2 to the Registration
                                       Statement on Form S-1 (No. 33-36701)
PART II
Item 9 - Changes in and                Current Report on Form 8-K of IEA Income Fund XI, L.P., filed
         Disagreements with            February 7, 1997 and April 14, 1997, respectively, and Amendment
         Accountants on Accounting     No. 1 to Current Report on Form 8-K filed February 26, 1997.
         and Financial Disclosure
</TABLE>


<PAGE>   2
                         PART I - FINANCIAL INFORMATION


Item 1. Business

   (a)  General Development of Business

   The Registrant is a limited partnership organized under the laws of the State
of California on July 30, 1990, for the purpose of owning and leasing marine
cargo containers, special purpose containers and container related equipment to
unaffiliated third-party lessees. The Registrant was initially capitalized with
$100, and commenced offering its limited partnership interests to the public
subsequent to December 14, 1990, pursuant to its Registration Statement on Form
S-1 (File No. 33-36701). The offering terminated on November 30, 1991.

   The Registrant raised $39,996,240 in subscription proceeds. The following
table sets forth the use of said subscription proceeds:


<TABLE>
<CAPTION>
                                                               Percentage of
                                                  Amount       Gross Proceeds
                                               -----------     --------------
<S>                                            <C>             <C>   
Gross Subscription Proceeds                    $39,996,240         100.0%

Public Offering Expenses:
    Underwriting Commissions                   $ 3,999,634          10.0%
    Offering and Organization Expenses         $   703,234           1.7%
                                               -----------         -----

    Total Public Offering Expenses             $ 4,702,868          11.7%
                                               -----------         -----

Net Proceeds                                   $35,293,372          88.3%

Acquisition Fees                               $   345,466           0.9%

Working Capital Reserve                        $   401,330           1.0%
                                               -----------         -----

Gross Proceeds Invested in Equipment           $34,546,576          86.4%
                                               ===========         =====
</TABLE>


   The general partner of the Registrant is Cronos Capital Corp. ("CCC"), a
wholly-owned subsidiary of Cronos Holdings/Investments (U.S.), Inc., a Delaware
corporation, which is in turn a wholly-owned subsidiary of The Cronos Group, a
Luxembourg company. These and other affiliated companies are ultimately
wholly-owned by The Cronos Group, a holding company registered in Luxembourg
("the Parent Company") and are collectively referred to as the "Group". The
activities of the container division of the Group are managed through the
Group's subsidiary in the United Kingdom, Cronos Containers Limited ("the
Leasing Company"). The Leasing Company manages the leasing operations of all
equipment owned or managed by the Group on its own behalf or on behalf of
third-party container owners, including all other programs organized by CCC.

   On January 1, 1991, Cronos Containers N.V., (formerly LPI Leasing Partners
International N.V.) entered into a Leasing Agent agreement with the Registrant
assuming the responsibility for all container leasing activities. On January 1,
1992, Cronos Containers N.V. entered into an Assignment of Leasing Agent
Agreement, whereby, Cronos Containers N.V. assigned and transferred to the
Leasing Company all of its rights, responsibilities and duties concerning the
Registrant's container leasing activities.

   For a discussion of recent developments in the Registrant's business, see
Item 7, "Management's Discussion and Analysis of Financial Condition and Result
of Operations."

   For information concerning the containers acquired by the Registrant, see
Item 2, "Properties."





                                       2
<PAGE>   3
   (b) Financial Information About Industry Segments

   The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which changes the way public business
enterprises report financial and descriptive information about reportable
operating segments. An operating segment is a component of an enterprise that
engages in business activities from which it may earn revenues and incur
expenses, whose operating results are regularly reviewed by the enterprise's
chief operating decision maker to make decisions about resources to be allocated
to the segment and assess its performance, and about which separate financial
information is available. Management operates the Registrant's container fleet
as a homogenous unit and has determined, after considering the requirements of
SFAS No. 131, that as such it has a single reportable operating segment.

   The Registrant derives revenues from dry cargo containers and refrigerated
containers. As of December 31, 1998, the Registrant operated 5,991 twenty-foot,
3,153 forty-foot and 190 forty-foot high-cube marine dry cargo containers, as
well as 100 twenty-foot and 50 forty-foot marine refrigerated cargo containers.
A summary of gross lease revenue, by product, for the years ended December 31,
1998, 1997 and 1996 follows:

<TABLE>
<CAPTION>
                                   1998               1997               1996
                                ----------         ----------         ----------
<S>                             <C>                <C>                <C>       
Dry cargo containers            $4,388,558         $4,666,826         $5,476,680
Refrigerated containers            386,429            456,323            549,806
                                ----------         ----------         ----------

Total                           $4,774,987         $5,123,149         $6,026,486
                                ==========         ==========         ==========
</TABLE>

   Due to the Registrant's lack of information regarding the physical location
of its fleet of containers when on lease in the global shipping trade, it is
impracticable to provide the geographic area information required by SFAS No.
131. Any attempt to separate "foreign" operations from "domestic" operations
would be dependent on definitions and assumptions that are so subjective as to
render the information meaningless and potentially misleading.

   No single lessee contributed more than 10% of the rental revenue earned
during 1998, 1997 and 1996.

   (c)  Narrative Description of Business

   (c)(1)(i) A marine cargo container is a reusable metal container designed for
the efficient carriage of cargo with a minimum of exposure to loss from damage
or theft. Containers are manufactured to conform to worldwide standards of
container dimensions and container ship fittings adopted by the International
Standards Organization ("ISO") in 1968. The standard container is either 20'
long x 8' wide x 8'6" high (one twenty-foot equivalent unit ("TEU")), the
standard unit of physical measurement in the container industry) or 40' long x
8' wide x 8'6" high (two TEU). Standardization of the construction, maintenance
and handling of containers allows containers to be picked up, dropped off,
stored and repaired efficiently throughout the world. This standardization is
the foundation on which the container industry has developed.

   Standard dry cargo containers are rectangular boxes with no moving parts,
other than doors, and are typically made of steel or aluminum. They are
constructed to carry a wide variety of cargos ranging from heavy industrial raw
materials to light-weight finished goods. Specialized containers include, among
others, refrigerated containers for the transport of temperature-sensitive goods
and tank containers for the carriage of liquid cargo. Dry cargo containers
currently constitute approximately 83% (in TEU) of the worldwide container
fleet. Refrigerated and tank containers currently constitute approximately 7%
(in TEU) of the worldwide container fleet, with other specialized containers
constituting the remainder.

   One of the primary benefits of containerization has been the ability of the
shipping industry to effectively lower freight rates due to the efficiencies
created by standardized intermodal containers. Containers can be handled much
more efficiently than loose cargo and are typically shipped via several modes of
transportation, including truck, railway and ship. Containers require loading
and unloading only once and remain sealed until arrival at the final
destination, significantly reducing transport time, labor and handling costs and
losses due to damage and theft. Efficient movement of containerized cargo
between ship and shore reduces the amount of time that a ship must spend in port
and reduces the transit time of freight moves.



                                       3
<PAGE>   4

   The logistical advantages and reduced freight rates brought about by
containerization have been major catalysts for world trade growth during the
last twenty-five years, resulting in increased demand for containerization. The
world's container fleet has grown from an estimated 270,000 TEU in 1969 to
approximately 12.2 million TEU by mid-1998.

   BENEFITS OF LEASING

   Leasing companies own approximately 47% of the world's container fleet with
the balance owned predominantly by shipping lines. Shipping lines, which
traditionally operate on tight profit margins, often supplement their owned
fleet of containers by leasing a portion of their equipment from container
leasing companies and, in doing so, achieve the following financial and
operational benefits:

   o  Leasing allows the shipping lines to utilize the equipment they need
      without having to make large capital expenditures;

   o  Leasing offers a shipping line an alternative source of financing in a
      traditionally capital-intensive industry;

   o  Leasing enables shipping lines to expand their routes and market shares at
      a relatively inexpensive cost without making a permanent commitment to
      support their new structure;

   o  Leasing allows shipping lines to respond to changing seasonal and trade
      route demands, thereby optimizing their capital investment and storage
      costs.

   TYPES OF LEASES

   The Registrant's containers are leased primarily to shipping lines operating
in major trade routes (see Item 1(d)). Most if not all of the Registrant's
marine dry cargo containers are leased pursuant to operating leases, primarily
master leases, where the containers are leased to the ocean carrier on a daily
basis for any desired length of time, with the flexibility of picking up and
dropping off containers at various agreed upon locations around the world. Some
of the Registrant's containers may be leased pursuant to term leases, which may
have durations of less than one year to five years. The Registrant's specialized
containers are generally leased on longer-term leases because the higher cost,
value and complexity of this equipment makes it more expensive to redeliver and
on-hire frequently.

   o  Master lease. Most short-term leases are "master leases," under which a
      customer reserves the right to lease a certain number of containers, as
      needed, under a general agreement between the lessor and the lessee. Such
      leases provide customers with greater flexibility by allowing them to pick
      up and drop off containers where and when needed, subject to restrictions
      and availability, as specified in each lease. The commercial terms of
      master leases are negotiated annually. Master leases also define the
      number of containers that may be returned within each calendar month, the
      return locations and applicable drop-off charges. Due to the increased
      flexibility they offer, master leases usually command higher per-diem
      rates and generate more ancillary fees (including pick-up, drop-off,
      handling and off-hire fees) than term leases.

   o  Term lease. Term leases are for a fixed period of time and include both
      long and short-term commitments, with most extending from three to five
      years. Term lease agreements may contain early termination penalties that
      apply in the event of early redelivery. In most cases, however, equipment
      is not returned prior to the expiration of the lease. Term leases provide
      greater revenue stability to the lessor, but at lower rates than master
      leases. Ocean carriers use long-term leases when they have a need for
      identified containers for a specified term. Short-term lease agreements
      have a duration of less than one year and include one-way, repositioning
      and round-trip leases. They differ from master leases in that they define
      the number and the term of the containers to be leased. Ocean carriers
      generally use one-way leases to manage trade imbalances (where more
      containerized cargo moves in one direction than another) by picking up a
      container in one port and dropping it off at another location after one or
      more legs of a voyage.




                                       4
<PAGE>   5

   The terms and conditions of the Registrant's leases provide that customers
are responsible for paying all taxes and service charges arising from container
use, maintaining the containers in good and safe operating condition while on
lease and paying for repairs, excluding ordinary wear and tear, upon redelivery.
Some leases provide for a "damage protection plan" whereby lessees, for an
additional payment (which may be in the form of a higher per-diem rate), are
relieved of the responsibility of paying some of the repair costs upon
redelivery of the containers. The Leasing Company has historically provided this
service on a limited basis to selected customers. Repairs provided under such
plans are carried out by the same depots, under the same procedures, as are
repairs to containers not covered by such plans. Customers also are required to
insure leased containers against physical damage and loss, and against third
party liability for loss, damage, bodily injury or death.

   Lease rates depend on several factors including the type of lease, length of
term, maintenance provided, type and age of the equipment, location and
availability, and market conditions.

   CUSTOMERS

   The Leasing Company, on behalf of the Registrant, leases the Registrant's
containers primarily to shipping lines operating in major trade routes. The
Leasing Company currently serves over 400 customers including the 20 largest
ocean carriers worldwide on behalf of the Group, the Registrant, and other third
party container owners. The Registrant is not dependent upon any particular
customer or group of customers and none of its customers accounts for more than
10% of its revenue. The Registrant's customers are billed and pay in United
States dollars. The Leasing Company sets maximum credit limits for the
Registrant's customers, limiting the number of containers leased to each
according to established credit criteria. The Leasing Company continually tracks
its credit exposure to each customer. The Leasing Company's credit committee
meets quarterly to analyze the performance of the Registrant's customers and to
recommend actions to be taken in order to minimize credit risks. The Leasing
Company uses specialist third party credit information services and reports
prepared by local staff to assess credit applications.

   FLEET PROFILE

   The Registrant acquired high-quality dry cargo containers manufactured to
specifications that exceed International Standards Organization (ISO) standards
and designed to minimize repair and operating costs.

   Dry cargo containers are the most commonly used type of container in the
shipping industry. The Registrant's dry cargo container fleet is constructed of
all Corten(R) steel (i.e., Corten(R) roofs, walls, doors and undercarriage),
which is a high-tensile steel yielding greater damage and corrosion resistance
than mild steel.

   Refrigerated containers are used to transport temperature-sensitive products,
such as meat, fruit, vegetables and photographic film. All of the Registrant's
refrigerated containers have high-grade stainless steel interiors. The majority
of the Registrant's 20-foot refrigerated containers have high-grade stainless
steel walls, while most of the Registrant's 40-foot refrigerated containers are
steel framed with aluminum outer walls to reduce weight. As with the dry cargo
containers, all refrigerated containers are designed to minimize repair and
maintenance and maximize damage resistance.

   The Registrant purchased its dry cargo containers from manufacturers in Korea
and Taiwan as part of a policy of sourcing container production in locations
where it can meet customer demands most effectively.

   The Registrant's refrigerated containers were purchased mainly from Korean
manufacturers. The majority of its refrigeration units were purchased from
Carrier Transicold, the primary container refrigeration unit supplier in the
United States.




                                       5
<PAGE>   6

   As of December 31, 1998, the Registrant owned 5,991 twenty-foot, 3,153
forty-foot, 190 forty-foot high-cube marine dry cargo containers and 100
twenty-foot and 50 forty-foot refrigerated cargo containers. The following table
sets forth the number of containers on lease, by container type and lease term:

<TABLE>
<CAPTION>
                                              Number of
                                            Containers on
                                                Lease
                                            -------------
<S>                                            <C>
20-Foot Dry Cargo Containers:
   Term Leases                                    529
   Master Leases                                3,691
                                                -----
        Total on Lease                          4,220
                                                =====

40-Foot Dry Cargo Containers:
   Term Leases                                    298
   Master Leases                                1,907
                                                -----
        Total on Lease                          2,205
                                                =====

40-Foot High-Cube Dry Cargo Containers:
   Term Leases                                     40
   Master Leases                                  126
                                                -----
        Total on Lease                            166
                                                =====

20-Foot Refrigerated Cargo Containers:
   Term Leases                                     19
   Master Leases                                   48
                                                -----
        Total on Lease                             67
                                                =====

40-Foot Refrigerated Cargo Containers:
   Term Leases                                      2
   Master Leases                                   33
                                                -----
        Total on Lease                             35
                                                =====
</TABLE>


   The Leasing Company makes payments to the Registrant based upon rentals
collected from ocean carriers after deducting certain operating expenses
associated with the containers, such as the base management fee payable to CCC,
certain expense reimbursements and incentive fees payable to CCC, the costs of
maintenance and repairs not performed by lessees, independent agent fees and
expenses, depot expenses for handling, inspection and storage, and additional
insurance.

   REPAIR AND MAINTENANCE

   All containers are inspected and repaired when redelivered by a customer, and
customers are obligated to pay for all damage repair, excluding wear and tear,
according to standardized industry guidelines. Depots in major port areas
perform repair and maintenance that is verified by independent surveyors or the
Leasing Company's technical and operations staff. Before any repair or
refurbishment is authorized on older containers in the Registrant's fleet, the
Leasing Company's technical and operations staff reviews the age, condition and
type of container, and its suitability for continued leasing. The Leasing
Company compares the cost of such repair or refurbishment with the prevailing
market resale price that might be obtained for that container and makes the
appropriate decision whether to repair or sell the container.




                                       6
<PAGE>   7

   MARKET FOR USED CONTAINERS

   The Registrant estimates that the period for which a dry cargo or
refrigerated container may be used as a leased marine cargo container ranges
from 10 to 15 years. The Leasing Company, on behalf of the Registrant, disposes
of used containers in a worldwide market in which buyers include wholesalers,
mini-storage operations, construction companies and others. As the Registrant's
fleet ages, a larger proportion of its revenue will be derived from selling its
containers.

   OPERATIONS

   The Registrant's container leasing and marketing operations are conducted
through the Leasing Company in the United Kingdom, with support provided by area
offices and dedicated agents located in San Francisco, California; Iselin, New
Jersey; Windsor, England; Hamburg; Antwerp; Auckland; Genoa; Gothenburg, Sweden;
Singapore; Hong Kong; Sydney; Tokyo; Taipei; Seoul; Rio de Janeiro; and
Shanghai.

   The Leasing Company also maintains agency relationships with over 20
independent agents around the world, to whom it pays commissions based upon the
amount of revenues they generate in the region or the number of containers that
are leased from their area on behalf of the Registrant. The agents are located
in jurisdictions where the volume of the Leasing Company's business necessitates
a presence in the area but is not sufficient to justify a fully-functioning
Leasing Company office or dedicated agent. These agents provide marketing
support to the area offices covering the region, together with limited
operational support.

   In addition, the Leasing Company relies on the services of over 300
independently-owned and operated depots around the world to inspect, repair,
maintain and store containers while off-hire. The Leasing Company's area offices
authorize all container movements into and out of the depot and supervise all
repair and maintenance performed by the depot. The Leasing Company's technical
staff sets the standards for repair of its owned and managed fleet throughout
the world and monitors the quality of depot repair work. The depots provide a
vital link to the Leasing Company's operations, as the redelivery of a container
into a depot is the point at which the container is off-hired from one customer
and repaired in preparation for re-leasing to the next.

   The Leasing Company's global network is integrated with its computer system
and provides 24-hour communication between offices and agents. The system allows
the Leasing Company to manage and control the Registrant's fleet on a global
basis, providing it with the responsiveness and flexibility necessary to service
the master lease market effectively. This system is an integral part of the
Leasing Company's service, as it processes information received from the various
offices, generates billings to the Registrant's lessees and produces a wide
range of reports on all aspects of the Registrant's leasing activities. The
system records the life history of each container, including the length of time
on and off lease and repair costs. It also traces port activity trends, leasing
activity and equipment data per customer. The operations and marketing data is
fully interfaced with the finance and accounting system to provide revenue, cost
and asset information to management and staff around the world.

   INSURANCE

   The Registrant's lease agreements typically require lessees to obtain
insurance to cover all risks of physical damage and loss of the equipment under
lease, as well as public liability and property damage insurance. However, the
precise nature and amount of the insurance carried by each ocean carrier varies
from lessee to lessee. In addition, the Registrant has purchased secondary
insurance effective in the event that a lessee fails to have adequate primary
coverage. This insurance covers liability arising out of bodily injury and/or
property damage as a result of the ownership and operation of the containers, as
well as insurance against loss or damage to the containers, loss of lease
revenues in certain cases and costs of container recovery and repair in the
event that a customer goes into bankruptcy. The Registrant believes that the
nature and the amounts of its insurance are customary in the container leasing
industry and subject to standard industry deductions and exclusions.

   (c)(1)(ii)  Inapplicable.

   (c)(1)(iii) Inapplicable.

   (c)(1)(iv)  Inapplicable.



                                       7
<PAGE>   8

   (c)(1)(v) The Registrant's containers are leased globally; therefore,
seasonal fluctuations are minimal. Other economic and business factors to which
the transportation industry in general and the container leasing industry in
particular are subject, include inflation, fluctuations in supply and demand for
equipment resulting from, among other things, obsolescence, changes in the
methods or economics of a particular mode of transportation or changes in
governmental regulations or safety standards.

   (c)(1)(vi) The Registrant established a working capital reserve of
approximately 1% of subscription proceeds raised. In addition, the Registrant
may reserve additional amounts from anticipated cash distributions to the
partners to meet working capital requirements.

   Amounts due under master leases are calculated at the end of each month and
billed approximately six to eight days thereafter. Amounts due under short-term
and long-term leases are set forth in the respective lease agreements and are
generally payable monthly. However, payment is normally received within 45-100
days of billing. Past due penalties are not customarily collected from lessees,
and accordingly, are not generally levied by the Leasing Company against lessees
of the Registrant's containers.

    (c)(1)(vii) For the year ended December 31, 1998, no single lessee accounted
for 10% or more of the Registrant's rental income. The Registrant does not
believe that its ongoing business is dependent upon a single customer, although
the loss of one or more of its largest customers could have an adverse effect
upon its business.

   (c)(1)(viii) Inapplicable.

   (c)(1)(ix) Inapplicable.

   (c)(1)(x) Competition among container leasing companies is based upon several
factors, including the location and availability of inventory, lease rates, the
type, quality and condition of the containers, the quality and flexibility of
the service offered and the confidence in and professional relationship with the
lessor. Other factors include the speed with which a leasing company can prepare
its containers for lease and the ease with which a lessee believes it can do
business with a lessor or its local area office. Not all container leasing
companies compete in the same market, as some supply only dry cargo containers
and not specialized containers, while others offer only long-term leases.

   The Leasing Company, on behalf of the Registrant, competes with various
container leasing companies in the markets in which it conducts business,
including Transamerica Leasing, GE-Seaco, Textainer Group, Triton Container
International Ltd. and others. In a series of recent consolidations, several
major leasing companies, as well as numerous smaller ones, have been acquired by
competitors. The Leasing Company believes that the current trend toward
consolidation in the container leasing industry will continue, making economies
of scale, worldwide operations, diversity, size of fleet and financial strength
increasingly important to the successful operation of a container leasing
business. Additionally, as containerization grows, customers may demand more
flexibility from leasing companies regarding per-diem rates, pick-up and
drop-off locations, availability of containers and other terms. Some of the
Leasing Company's competitors may have greater financial resources than the
Leasing Company and may be more capable of offering lower per-diem rates. In the
Leasing Company's experience, however, ocean carriers will generally lease
containers from more than one leasing company in order to minimize dependence on
a single supplier.

   (c)(1)(xi) Inapplicable.




                                       8
<PAGE>   9

   (c)(1)(xii) Environmental Matters

   A portion of the Registrant's equipment portfolio consists of special purpose
containers, primarily refrigerated containers. Historically, refrigerated
containers have utilized a refrigerant gas which is a chlorofluorocarbon ("CFC")
compound. It is generally assumed that CFCs are harmful to the Earth's ozone
layer when released into the atmosphere. Many nations, including the United
States, have taken action, both collectively and individually, to regulate CFCs.
These nations set various targets for the reduction in production and use of
CFCs starting as early as 1993, and their eventual elimination. There has been
substantial progress recently to determine a viable substitute for the
refrigerant used in containers, such that both the Leasing Company and the
container leasing industry association have selected a replacement refrigerant.
Production of new container refrigeration units operating with the replacement
refrigerant became generally available in 1993. All of the Registrant's
refrigerated containers use CFC refrigerated gas in the operation and insulation
of the containers. Depending on market pressures and future governmental
regulations, the Registrant's refrigerated containers may have to be retrofitted
with non-CFC refrigerants, the cost of which will be borne by the Registrant.
The Leasing Company's technical staff has cooperated with refrigeration
manufacturers in conducting investigations into the most effective and
economical retrofit plan. CCC and the Leasing Company believe that this expense,
should it be required, would not be material to the Registrant's financial
position or results of operations. In addition, refrigerated containers that are
not retrofitted may command lower prices in the used container market. Most of
the independent depot operators utilized by the Registrant currently have the
facilities to provide CFC recycling and disposal services to container owners
and lessors such as the Registrant.

   Under the state and Federal laws of the United States, and possibly under the
laws of other nations, the owner of a container may be liable for environmental
damage and/or cleanup and/or other sums in the event of actual or threatened
discharge or other contamination by material in a container. This liability may
be imposed on a container owner, such as the Registrant, even if the owner is
not at fault.

    (c)(1)(xiii) The Registrant, as a limited partnership, is managed by CCC,
the general partner, and accordingly does not itself have any employees. CCC has
15 employees, consisting of 3 officers, 5 other managers and 7 clerical and
staff personnel.

   (d) Financial Information about Foreign and Domestic Operations and Export
Sales

   The Registrant's business is not divided between foreign or domestic
operations. The Registrant's business is the leasing of containers worldwide to
ocean carriers. To this extent, the Registrant's operations are subject to the
fluctuations of world economic and political conditions. Such factors may affect
the pattern and levels of world trade.

   The Registrant believes that the profitability of, and risks associated with,
leases to foreign customers is generally the same as those of leases to domestic
customers. The Leasing Company's leases generally require all payments to be
made in United States currency.





                                       9
<PAGE>   10

Item 2. Properties

   As of December 31, 1998, the Registrant owned 5,991 twenty-foot, 3,153
forty-foot and 190 forty-foot high-cube marine dry cargo containers, as well as
100 twenty-foot and 50 forty-foot refrigerated containers suitable for
transporting cargo by rail, sea or highway. The average useful life and
manufacturers' invoice cost of the containers in the Registrant's fleet as of
December 31, 1998 were as follows:


<TABLE>
<CAPTION>
                                             Estimated
                                            Useful Life      Average Age      Average Cost
                                            -----------      -----------      ------------
<S>                                         <C>              <C>              <C>   
20-Foot Dry Cargo Containers                10-15 years        8 years          $2,776

40-Foot Dry Cargo Containers                10-15 years        8 years          $4,571

40-Foot High-Cube Dry Cargo Containers      10-15 years        8 years          $4,988

20-Foot Refrigerated Cargo Containers       10-15 years        8 years         $19,086

40-Foot Refrigerated Cargo Containers       10-15 years        8 years         $21,734
</TABLE>


   Utilization by lessees of the Registrant's containers fluctuates over time
depending on the supply of and demand for containers in the Registrant's
inventory locations. During 1998, utilization of the Registrant's containers
averaged 76% and 72% respectively, for the Registrant's dry cargo and
refrigerated container fleet.

   During 1998, the Registrant disposed of 140 twenty-foot, 92 forty-foot and
five forty-foot high-cube marine dry cargo containers at an average book loss of
$498 per container.


Item 3. Legal Proceedings

   As reported in the Registrant's Current Report on Form 8-K and Amendment No.
1 to Current Report on Form 8-K, filed with the Commission on February 7, 1997
and February 26, 1997, respectively, Arthur Andersen, London, England, resigned
as auditors of The Cronos Group, the Parent Company, on February 3, 1997. See
Item 9, "Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure."

   In connection with its resignation, Arthur Andersen also prepared a report
pursuant to the provisions of Section 10A(b)(2) of the Securities Exchange Act
of 1934, as amended, for filing by the Parent Company with the Securities and
Exchange Commission (the "SEC"). Following the report of Arthur Andersen, the
SEC, on February 10, 1997, commenced a private investigation of the Parent
Company for the purpose of investigating the matters discussed in such report
and related matters. The Registrant does not believe that the focus of the SEC's
investigation is upon the Registrant or CCC. CCC is unable to predict the
outcome of the SEC's ongoing private investigation of the Parent Company.

Item 4. Submission of Matters to a Vote of Security Holders

   Inapplicable.




                                       10
<PAGE>   11

                                     PART II


Item 5. Market for the Registrant's Common Equity and Related Stockholder
        Matters

   (a)  Market Information

   (a)(1)(i) The Registrant's outstanding units of limited partnership interests
are not traded on any market nor does an established public trading market exist
for such purposes.

   (a)(1)(ii)  Inapplicable.

   (a)(1)(iii) Inapplicable.

   (a)(1)(iv)  Inapplicable.

   (a)(1)(v)   Inapplicable.

   (a)(2)      Inapplicable.

   (b)         Holders
                                                     Number of Unit
   (b)(1) Title of Class                                 Holders
          --------------                           as of December 31,
                                                          1998
                                                   ------------------
           Units of limited partnership                   3,285
           interests

   (c)  Dividends

   Inapplicable. For the distributions made by the Registrant to its limited
partners, see Item 6 below, "Selected Financial Data."


                                       11
<PAGE>   12

Item 6. Selected Financial Data


<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                    -------------------------------------------------------------------------------------------
                                        1998                1997                1996                1995                1994
                                    -----------         -----------         -----------         -----------         -----------
<S>                                 <C>                 <C>                 <C>                 <C>                 <C>        
Net lease revenue                   $ 2,860,286         $ 3,106,508         $ 3,781,622         $ 4,908,910         $ 4,802,127

Net earnings                        $   655,187         $   950,404         $ 1,625,368         $ 2,758,007         $ 2,575,709

Net earnings per unit of
   limited partnership              $      0.26         $      0.40         $      0.69         $      1.25         $      1.16
   interest

Cash distributions per unit
of limited partnership interest     $      1.50         $      1.61         $      2.12         $      2.22         $      2.04

At year-end:

Total assets                        $22,149,507         $24,650,329         $27,094,345         $30,040,568         $32,207,224

Partners' capital                   $22,074,507         $24,575,329         $27,019,345         $29,858,468         $31,784,230
</TABLE>




Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

LIQUIDITY AND CAPITAL RESOURCES

   The Registrant's primary objective is to generate cash flow from operations
for distribution to its limited partners and, during the initial years of
operation, reinvest excess cash flow in additional equipment. Aside from the
initial working capital reserve retained from gross subscription proceeds (equal
to approximately 1% of such proceeds), the Registrant relies primarily on
container rental receipts to meet this objective as well as to finance operating
needs. No credit lines are maintained to finance working capital.

   At December 31, 1998, the Registrant had $1,506,163 in cash and cash
equivalents, an increase of $111,491 and a decrease of $99,394, respectively,
from the cash balances at December 31, 1997 and December 31, 1996.

   Cash distributions from operations are allocated 5% to the general partner
and 95% to the limited partners. Distributions of sales proceeds are allocated
1% to the general partner and 99% to the limited partners. This sharing
arrangement will remain in place until the limited partners receive aggregate
distributions in an amount equal to their capital contributions plus a 10%
cumulative, compounded (daily), annual return on their adjusted capital
contributions. Thereafter, all distributions will be allocated 15% to the
general partner and 85% to the limited partners, pursuant to section 6.1(b) of
the Partnership Agreement. Cash distributions from operations to the general
partner in excess of 5% of distributable cash will be considered an incentive
fee and compensation to the general partner.

   From inception through February 28, 1999, the Registrant has distributed
$29,465,184 in cash from operations and $66,660 in cash from container sales
proceeds to its limited partners. This represents total distributions of
$29,531,844 or approximately 74% of the limited partners' original invested
capital. Distributions are paid monthly, based primarily on each quarter's cash
flow from operations. Monthly distributions are also affected by periodic
increases or decreases to working capital reserves, as deemed appropriate by the
general partner. Sales proceeds distributed to its partners may fluctuate in
subsequent periods, reflecting the level of container disposals.



                                       12
<PAGE>   13

   The year ended December 31, 1998 was a volatile period for the container
leasing market. Opinions on the outlook for the market ranged from optimism that
the fallout from the Asian crisis could be contained to concern that it would
more seriously affect the global economy. As worries about the global economy
intensified, expectations for world economic growth shifted downward. The
effects of global financial concerns also slowed the growth of world
containerized trade to 5%-6% during 1998 compared to 7%-8% in recent past years,
and limited the demand for leased containers by the ocean carriers. At the same
time, significant trade imbalances developed between Asia and the rest of the
world. The devalued currencies of many Asian countries gave rise to booming
exports while, together with restricted credit, curtailing the demand for
imports from the West. These trade imbalances prompted renewed requirements for
leased containers in many parts of Asia where equipment shortages developed amid
declining inventories. But, the increased demand resulting from the shortage of
containers in many areas of Asia must be viewed against the continuing large
surplus of off-hire units in Europe and the Americas resulting from the shifting
trade patterns. These leasing market conditions may impact the Registrant's
financial condition and operating performance during 1999. Additionally, see the
discussion regarding The Cronos Group under Item 7., Management Discussion and
Analysis of Financial Condition and Results of Operations hereof.

RESULTS OF OPERATIONS

1998 - 1997

   Amid this environment of global economic uncertainty, other key trends that
have been in evidence over the past few years continued to affect the container
leasing industry and the Registrant's operations during 1998. They include
consolidation both within the shipping industry and the container leasing
industry; greater efficiencies achieved by our customers through the use of
mega-size containerships and the pooling of owned equipment; and, the erosion of
per-diem rental rates.

   As the leasing industry's equipment remained in surplus, ocean carriers and
transport companies continued to be selective about the age and condition of
containers taken on-hire. Many have adopted a policy of only leasing containers
of a certain age or less. It has been the Registrant's experience that in
periods of weak demand, many lessees insist on equipment between three to five
years of age. Such criteria currently serves as a barrier to leasing older
containers including those within the Registrant's fleet and contributed to the
decline in the Registrant's results of operations. The primary component of the
Registrant's results of operations is net lease revenue. Net lease revenue is
determined by deducting direct operating expenses, management fees and
reimbursed administrative expenses, from rental revenues billed by the Leasing
Company from the leasing of the Registrant's containers. Net lease revenue is
directly related to the size, utilization and per-diem rental rates of the
Registrant's fleet. Net lease revenue for 1998 declined by approximately 8% when
compared to 1997. The Registrant expects net lease revenue to decline in
subsequent periods as current container leasing market conditions continue.

   Gross rental revenue, a component of net lease revenue, decreased from
$5,123,149 in 1997, to $4,774,987 in 1998. This decline was primarily a result
of lower per-diem rental rates and utilization levels. The Registrant's dry
cargo container utilization rate averaged 76% during 1998, unchanged from the
prior year. Refrigerated container utilization rates decreased from an average
of 82% during 1997, to an average of 72% during 1998. Dry cargo container
per-diem rental rates decreased by 7% from 1997 levels. Refrigerated container
per-diem rental rates also declined 7% from 1997 levels. The Registrant's
average fleet size (as measured in twenty-foot equipment units ("TEU")) was
13,065 TEU in 1998, as compared to 13,246 TEU in 1997.

   Rental equipment operating expenses were approximately 27% of rental revenue
during 1998, unchanged from the prior year. Base management fees, dependent on
the operating performance of the fleet, declined $32,177, or approximately 9%
during 1998 when compared with 1997.




                                       13
<PAGE>   14

   The Registrant disposed of 140 twenty-foot, 92 forty-foot and five forty-foot
high-cube marine dry cargo containers during 1998, as compared to 74
twenty-foot, 38 forty-foot marine dry cargo containers and three forty-foot
high-cube marine dry cargo containers during 1997. These disposals resulted in a
loss of $118,018 for 1998, as compared to a loss of $18,685 for 1997. The
Registrant does not believe that the carrying amount of its containers has been
permanently impaired or that events or changes in circumstances have indicated
that the carrying amount of its containers may not be fully recoverable. The
Registrant believes that the 1998 loss on container disposals was a result of
various factors including the age, condition, suitability for continued leasing,
as well as the geographical location of the containers when disposed. These
factors will continue to influence the amount of sales proceeds received and the
related gain on container disposals, which may fluctuate in subsequent periods.

1997 - 1996

   The primary component of the Registrant's results of operations is net lease
revenue. Net lease revenue is directly related to the size, utilization and
per-diem rental rates of the Registrant's fleet. Net lease revenue declined by
approximately 18% during 1997 when compared to 1996.

   Gross rental revenue, a component of net lease revenue, decreased from
$6,026,486 in 1996, to $5,123,149 in 1997. This decline was primarily a result
of lower per-diem rental rates and utilization levels. The Registrant's dry
cargo container utilization rate decreased from an average of 79% during 1996,
to an average of 76% during 1997. Refrigerated container utilization rates also
decreased from an average of 94% during 1996, to an average of 82% during 1997.
Dry cargo container per-diem rental rates decreased by 12% from 1996 levels.
Refrigerated container per-diem rental rates declined 9% from 1996 levels. The
Registrant's average fleet size (as measured in twenty-foot equipment units
("TEU") was 13,246 TEU in 1997, as compared to 13,225 TEU in 1996.

   Rental equipment operating expenses were approximately 27% of rental revenue
during 1997, as compared to 25% during 1996. This increase was largely
attributable to an increase in costs associated with lower utilization levels,
including handling and storage. Base management fees, dependent on the operating
performance of the fleet, declined $56,656, or approximately 14% during 1997
when compared to 1996.

   Other general and administrative expenses increased $16,370, or approximately
25% during 1997 when compared to 1996. This was due to an increase in the cost
of the Registrant's annual audit, as well as an increase in the costs of
preparing and processing the Registrant's regulatory filings.

   The Registrant disposed of 74 twenty-foot, 38 forty-foot and three forty-foot
high-cube marine dry cargo containers during 1997, compared to 107 twenty-foot
and nine forty-foot marine dry cargo containers during 1996. These disposals
resulted in a loss of $18,685 for 1997, as compared to a gain of $56,150 for
1996. The Registrant does not believe that the carrying amount of its containers
has been permanently impaired or that events or changes in circumstances have
indicated that the carrying amount of its containers may not be fully
recoverable. The Registrant believes that the 1997 loss on container disposals
was a result of various factors including the age, condition, suitability for
continued leasing, as well as the geographical location of the containers when
disposed. These factors will continue to influence the amount of sales proceeds
received and the related gain on container disposals, which may fluctuate in
subsequent periods.

THE CRONOS GROUP'S CREDIT FACILITY

   In 1993, the Parent Company negotiated a credit facility (hereinafter, the
"Credit Facility") with several banks for the use by the Parent Company and its
subsidiaries, including CCC. At December 31, 1996, approximately $73,500,000 in
principal indebtedness was outstanding under the Credit Facility. As a party to
the Credit Facility, CCC is jointly and severally liable for the repayment of
all principal and interest owed under the Credit Facility. The obligations of
CCC, and the five other subsidiaries of the Parent Company that are borrowers
under the Credit Facility, are guaranteed by the Parent Company.


                                       14
<PAGE>   15

   Following negotiations in 1997 with the banks providing the Credit Facility,
an Amended and Restated Credit Agreement was executed in June 1997, subject to
various actions being taken by the Parent Company and its subsidiaries,
primarily relating to the provision of additional collateral. This Agreement was
further amended in July 1997 and the provisions of the Agreement and its
Amendment converted the facility to a term loan, payable in installments, with a
final maturity date of May 31, 1998. The terms of the Agreement and its
Amendment also provided for additional security over shares in the subsidiary of
the Parent Company that owns the head office of the Parent Company's container
leasing operations. They also provided for the loans to the former Chairman of
$5,900,000 and $3,700,000 to be restructured as obligations of the former
Chairman to another subsidiary of the Parent Company (not CCC), together with
the pledge to this subsidiary company of 2,030,303 Common Shares beneficially
owned by him in the Parent Company as security for these loans. They further
provided for the assignment of these loans to the lending banks, together with
the pledge of 1,000,000 shares and the assignment of the rights of the Parent
Company in respect of the other 1,030,303 shares. Additionally, CCC granted the
lending banks a security interest in the fees to which it is entitled for the
services it renders to the container leasing partnerships of which it acts as
general partner, including its fee income payable by the Registrant. The Parent
Company did not repay the Credit Facility at the amended maturity date of May
31, 1998.

   On June 30, 1998, the Parent Company entered into a third amendment (the
"Third Amendment") to the Credit Facility. Under the Third Amendment, the
remaining principal amount of $36,800,000 was to be amortized in varying monthly
amounts commencing on July 31, 1998 with $26,950,000 due on September 30, 1998
and a final maturity date of January 8, 1999. The Parent Company did not repay
the amounts due on September 30, 1998 and January 8, 1999. The balance
outstanding on the Credit Facility at December 31, 1998 was $33,110,000.

   In March 1999, the Parent Company agreed to a proposal to extend the Credit
Facility until September 30, 1999 and expects that a fourth amendment (the
"Fourth Amendment"), with a final maturity date of September 30, 1999, will be
signed in April 1999.

   The directors of the Parent Company also are pursuing alternative sources of
financing to meet the amended repayment obligations anticipated under the Fourth
Amendment. Failure to meet revised lending terms would constitute an event of
default with the lenders. The declaration of an event of default would result in
further defaults with other lenders under loan agreement cross-default
provisions. Should a default of the term loans be enforced, the Parent Company
and CCC may be unable to continue as going concerns.

   The Registrant is not a borrower under the Credit Facility, and neither the
containers nor the other assets of the Registrant have been pledged as
collateral under the Credit Facility.

   CCC is unable to determine the impact, if any, these issues may have on the
future operating results, financial condition and cash flows of the Registrant
or CCC and on the Leasing Company's ability to manage the Registrant's fleet in
subsequent periods.



                                       15
<PAGE>   16

YEAR 2000

   The Registrant relies upon the financial and operational systems provided by
the Leasing Company and its affiliates, as well as the systems provided by other
independent third parties to service the three primary areas of its business:
investor processing/maintenance; container leasing/asset tracking; and
accounting finance. The Registrant has received confirmation from its
third-party investor processing/maintenance vendor that their system is Year
2000 compliant. The Registrant does not expect a material increase in its vendor
servicing fee to reimburse Year 2000 costs. Container leasing/asset tracking and
accounting/finance services are provided to the Registrant by CCC and its
affiliate, the Leasing Company, pursuant to the respective Limited Partnership
Agreement and Leasing Agent Agreement. CCC and the Leasing Company have
initiated a program to prepare their systems and applications for the Year 2000.
Preliminary studies indicate that testing, conversion and upgrading of system
applications is expected to cost CCC and the Leasing Company less than $500,000.
Pursuant to the Limited Partnership Agreement, CCC or the Leasing Company, may
not seek reimbursement of data processing costs associated with the Year 2000
program. The financial impact of making these required system changes is not
expected to be material to the Registrant's financial position, results of
operations or cash flows.

CAUTIONARY STATEMENT

   This Annual Report on Form 10-K contains statements relating to future
results of the Registrant, including certain projections and business trends,
that are "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially from those
projected as a result of certain risks and uncertainties, including but not
limited to changes in: economic conditions; trade policies; demand for and
market acceptance of leased marine cargo containers; competitive utilization and
per-diem rental rate pressures; as well as other risks and uncertainties,
including but not limited to those described above in the discussion of the
marine container leasing business under Item 7., Management's Discussion and
Analysis of Financial Condition and Results of Operations; and those detailed
from time to time in the filings of the Registrant with the Securities and
Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

   Inapplicable

Item 8. Financial Statements and Supplementary Data







                                       16
<PAGE>   17

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


The Partners
IEA Income Fund XI, L.P.


We have audited the accompanying balance sheets of IEA Income Fund XI, L.P., as
of December 31, 1998 and 1997, and the related statements of operations,
partners' capital, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IEA Income Fund XI, L.P., as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.

As further discussed in Note 12 to the financial statements, The Cronos Group,
which is the indirect corporate parent of Cronos Capital Corp., the general
partner of the Partnership, is subject to an investigation, commenced on
February 10, 1997, by the United States Securities and Exchange Commission.
Furthermore, Cronos Capital Corp. and five other subsidiaries of The Cronos
Group are borrowers under a credit facility with several banks. The credit
facility is guaranteed by The Cronos Group. A substantial payment was due on
September 30, 1998, and the entire loan balance was due on January 8, 1999. The
Cronos Group did not repay the amount due on September 30, 1998 and January 8,
1999. As of the date of our report, The Cronos Group had not yet secured an
extension of the credit facility or obtained a source for repayment of the
balance due.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.

                                     Moore Stephens, P.C.
                                     Certified Public Accountants


New York, New York
March 5, 1999





                                       17
<PAGE>   18
                            IEA INCOME FUND XI, L.P.

                                 BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997



<TABLE>
<CAPTION>
                                                                              1998                 1997
                                                                          ------------         ------------
<S>                                                                       <C>                  <C>         
                                   Assets

Current assets:
   Cash and cash equivalents, includes $1,506,063 in 1998
      and $1,394,472 in 1997 in interest-bearing accounts (note 3)        $  1,506,163         $  1,394,672
   Net lease receivables due from Leasing Company
      (notes 1 and 5)                                                          499,399              556,611
                                                                          ------------         ------------

         Total current assets                                                2,005,562            1,951,283
                                                                          ------------         ------------

Container rental equipment, at cost                                         34,982,063           35,812,722
   Less accumulated depreciation                                            14,838,118           13,113,676
                                                                          ------------         ------------
      Net container rental equipment                                        20,143,945           22,699,046
                                                                          ------------         ------------

                                                                          $ 22,149,507         $ 24,650,329
                                                                          ============         ============
                    Liabilities and Partners' Capital

Current liabilities:
   Accrued expenses (note 6)                                              $     75,000         $     75,000
                                                                          ------------         ------------

         Total current liabilities                                              75,000               75,000
                                                                          ------------         ------------

Partners' capital (deficit):
   General partner                                                             (49,424)             (24,417)
   Limited partners (note 10)                                               22,123,931           24,599,746
                                                                          ------------         ------------

         Total partners' capital                                            22,074,507           24,575,329
                                                                          ------------         ------------

                                                                          $ 22,149,507         $ 24,650,329
                                                                          ============         ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       18
<PAGE>   19
                            IEA INCOME FUND XI, L.P.

                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                                            1998                1997                1996
                                                        -----------         -----------         -----------
<S>                                                     <C>                 <C>                 <C>        
Net lease revenue (notes 1 and 8)                       $ 2,860,286         $ 3,106,508         $ 3,781,622

Other operating expenses:
  Depreciation and amortization (notes 1 and 4)           2,074,006           2,122,710           2,237,202
  Other general and administrative expenses                  86,965              81,744              65,374
                                                        -----------         -----------         -----------

                                                          2,160,971           2,204,454           2,302,576
                                                        -----------         -----------         -----------

    Earnings from operations                                699,315             902,054           1,479,046

Other income (expense):
  Interest income                                            73,890              67,035              90,172
  Net gain (loss) on disposal of equipment                 (118,018)            (18,685)             56,150
                                                        -----------         -----------         -----------
                                                            (44,128)             48,350             146,322
                                                        -----------         -----------         -----------

    Net earnings                                        $   655,187         $   950,404         $ 1,625,368
                                                        ===========         ===========         ===========

Allocation of net earnings:
  General partner                                       $   131,285         $   145,279         $   248,082
  Limited partners                                          523,902             805,125           1,377,286
                                                        -----------         -----------         -----------

                                                        $   655,187         $   950,404         $ 1,625,368
                                                        ===========         ===========         ===========

Limited partners' per unit share of net earnings        $      0.26         $      0.40         $      0.69
                                                        ===========         ===========         ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       19
<PAGE>   20

                            IEA INCOME FUND XI, L.P.

                         STATEMENTS OF PARTNERS' CAPITAL

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                       Limited
                                      Partners               General
                                      (Note 10)              Partner               Total
                                     ------------         ------------         ------------
<S>                                  <C>                  <C>                  <C>         
Balances at December 31, 1995        $ 29,883,299         $    (24,831)        $ 29,858,468

Net earnings                            1,377,286              248,082            1,625,368

Cash distributions                     (4,241,264)            (223,227)          (4,464,491)
                                     ------------         ------------         ------------

Balances at December 31, 1996          27,019,321                   24           27,019,345

Net earnings                              805,125              145,279              950,404

Cash distributions                     (3,224,700)            (169,720)          (3,394,420)
                                     ------------         ------------         ------------

Balances at December 31, 1997          24,599,746              (24,417)          24,575,329

Net earnings                              523,902              131,285              655,187

Cash distributions                     (2,999,717)            (156,292)          (3,156,009)
                                     ------------         ------------         ------------

Balances at December 31, 1998        $ 22,123,931         $    (49,424)        $ 22,074,507
                                     ============         ============         ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       20
<PAGE>   21
                            IEA INCOME FUND XI, L.P.

                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                                                1998                1997                1996
                                                            -----------         -----------         -----------
<S>                                                         <C>                 <C>                 <C>        
Cash flows from operating activities:
   Net earnings                                             $   655,187         $   950,404         $ 1,625,368
   Adjustments to reconcile net earnings to net
     cash provided by (used in) operating
     activities:
         Depreciation and amortization                        2,074,006           2,122,710           2,237,202
         Net loss (gain) on disposal of equipment               118,018              18,685             (56,150)
         Decrease (increase) in net lease
          receivables due from Leasing Company                   (6,866)            208,391             170,095
                                                            -----------         -----------         -----------

           Total adjustments                                  2,185,158           2,349,786           2,351,147
                                                            -----------         -----------         -----------

           Net cash provided by operating activities          2,840,345           3,300,190           3,976,515
                                                            -----------         -----------         -----------

Cash flows from (used in) investing activities:
   Proceeds from sale of container rental equipment             427,155             212,612             287,307
   Purchases of container rental equipment                           --            (313,588)           (207,960)
   Acquisition fees paid to general partner                          --             (15,679)            (10,398)
                                                            -----------         -----------         -----------

           Net cash from (used in) investing                    427,155            (116,655)             68,949
                                                            -----------         -----------         -----------
           activities

Cash flows used in financing activities:
   Distributions to partners                                 (3,156,009)         (3,394,420)         (4,464,491)
                                                            -----------         -----------         -----------

           Net cash used in financing activities             (3,156,009)         (3,394,420)         (4,464,491)
                                                            -----------         -----------         -----------

Net increase (decrease) in cash and cash equivalents            111,491            (210,885)           (419,027)

Cash and cash equivalents at beginning of year                1,394,672           1,605,557           2,024,584
                                                            -----------         -----------         -----------

Cash and cash equivalents at end of year                    $ 1,506,163         $ 1,394,672         $ 1,605,557
                                                            ===========         ===========         ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                       21
<PAGE>   22

                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


(1)  Summary of Significant Accounting Policies

     (a) Nature of Operations

         IEA Income Fund XI, L.P. (the "Partnership") is a limited partnership
         organized under the laws of the State of California on July 30, 1990
         for the purpose of owning and leasing marine cargo containers worldwide
         to ocean carriers. To this extent, the Partnership's operations are
         subject to the fluctuations of world economic and political conditions.
         Such factors may affect the pattern and levels of world trade. The
         Partnership believes that the profitability of, and risks associated
         with, leases to foreign customers is generally the same as those of
         leases to domestic customers. The Partnership's leases generally
         require all payments to be made in United States currency.

         Cronos Capital Corp. ("CCC") is the general partner and, with its
         affiliate Cronos Containers Limited (the "Leasing Company"), manages
         the business of the Partnership. The Partnership shall continue until
         December 31, 2010, unless sooner terminated upon the occurrence of
         certain events.

         The Partnership commenced operations on January 31, 1991, when the
         minimum subscription proceeds of $1,000,000 were obtained. The
         Partnership offered 2,000,000 units of limited partnership interest at
         $20 per unit, or $40,000,000. The offering terminated on November 30,
         1991, at which time 1,999,812 limited partnership units had been
         purchased.

     (b) Leasing Company and Leasing Agent Agreement

         The Partnership has entered into a Leasing Agent Agreement whereby the
         Leasing Company has the responsibility to manage the leasing
         operations of all equipment owned by the Partnership. Pursuant to the
         Agreement, the Leasing Company is responsible for leasing, managing
         and re-leasing the Partnership's containers to ocean carriers and has
         full discretion over which ocean carriers and suppliers of goods and
         services it may deal with. The Leasing Agent Agreement permits the
         Leasing Company to use the containers owned by the Partnership,
         together with other containers owned or managed by the Leasing Company
         and its affiliates, as part of a single fleet operated without regard
         to ownership. Since the Leasing Agent Agreement meets the definition
         of an operating lease in Statement of Financial Accounting Standards
         (SFAS) No. 13, it is accounted for as a lease under which the
         Partnership is lessor and the Leasing Company is lessee.

         The Leasing Agent Agreement generally provides that the Leasing
         Company will make payments to the Partnership based upon rentals
         collected from ocean carriers after deducting direct operating
         expenses and management fees to CCC and the Leasing Company. The
         Leasing Company leases containers to ocean carriers, generally under
         operating leases which are either master leases or term leases (mostly
         one to five years). Master leases do not specify the exact number of
         containers to be leased or the term that each container will remain on
         hire but allow the ocean carrier to pick up and drop off containers at
         various locations, and rentals are based upon the number of containers
         used and the applicable per-diem rate. Accordingly, rentals under
         master leases are all variable and contingent upon the number of
         containers used. Most containers are leased to ocean carriers under
         master leases; leasing agreements with fixed payment terms are not
         material to the financial statements. Since there are no material
         minimum lease rentals, no disclosure of minimum lease rentals is
         provided in these financial statements.

         See note 12 for further discussion regarding CCC and the Leasing
         Company.




                                       22
<PAGE>   23
                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS


     (c) Concentrations of Credit Risk

         The Partnership's financial instruments that are exposed to
         concentrations of credit risk consist primarily of cash, cash
         equivalents and net lease receivables due from the Leasing Company. See
         note 3 for further discussion regarding the credit risk associated with
         cash and cash equivalents.

         Net lease receivables due from the Leasing Company (see notes 1(b) and
         5 for discussion regarding net lease receivables) subject the
         Partnership to a significant concentration of credit risk. These net
         lease receivables, representing rentals collected from ocean carriers
         after deducting direct operating expenses and management fees to CCC
         and the Leasing Company, are remitted by the Leasing Company to the
         Partnership three to four times per month. The Partnership has
         historically never incurred a loss associated with the collectability
         of unremitted net lease receivables due from the Leasing Company.
         However, CCC and the Partnership are unable to predict the outcome of
         the events discussed in note 12 and their potential impact on the
         credit risk associated with these net lease receivables.

     (d) Basis of Accounting

         The Partnership utilizes the accrual method of accounting. Net lease
         revenue is recorded by the Partnership in each period based upon its
         leasing agent agreement with the Leasing Company. Net lease revenue is
         generally dependent upon operating lease rentals from operating lease
         agreements between the Leasing Company and its various lessees, less
         direct operating expenses and management fees due in respect of the
         containers specified in each operating lease agreement.

         The preparation of financial statements in conformity with generally
         accepted accounting principles (GAAP) requires the Partnership to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and disclosure of contingent assets and liabilities at
         the date of the financial statements and the reported amounts of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

     (e) Allocation of Net Earnings and Partnership Distributions

         Net earnings have been allocated between general and limited partners
         in accordance with the Partnership Agreement.

         Actual cash distributions differ from the allocations of net earnings
         between the general and limited partners as presented in these
         financial statements. Partnership distributions are paid to its
         partners (general and limited) from distributable cash from operations,
         allocated 95% to the limited partners and 5% to the general partner.
         Distributions of sales proceeds are allocated 99% to the limited
         partners and 1% to the general partner. These allocations remain in
         effect until such time as the limited partners have received from the
         Partnership aggregate distributions in an amount equal to their capital
         contributions plus a 10% cumulative, compounded (daily), annual return
         on their adjusted capital contributions. Thereafter, all Partnership
         distributions will be allocated 85% to the limited partners and 15% to
         the general partner. Cash distributions from operations to the general
         partner in excess of 5% of distributable cash will be considered an
         incentive fee and compensation to the general partner.

     (f) Acquisition Fees

         Pursuant to Article IV Section 4.2 of the Partnership Agreement,
         acquisition fees paid to CCC are based on 5% of the equipment purchase
         price. These fees are capitalized and included in the cost of the
         rental equipment. The fees are payable in two or more installments
         commencing in the year of purchase.



                                       23
<PAGE>   24

                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS


     (g) Container Rental Equipment

         In accordance with SFAS No. 121, "Accounting for the Impairment of
         Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
         container rental equipment is considered to be impaired if the carrying
         value of the asset exceeds the expected future cash flows from related
         operations (undiscounted and without interest charges). If impairment
         is deemed to exist, the assets are written down to fair value.
         Depreciation policies are also evaluated to determine whether
         subsequent events and circumstances warrant revised estimates of useful
         lives. There were no reductions to the carrying value of container
         rental equipment during 1998, 1997 and 1996.

         Container rental equipment is depreciated over a twelve-year life on a
         straight line basis to its salvage value, estimated to be 30%.

     (h) Amortization

         The Partnership's organization costs were amortized over 60 months on a
         straight-line basis.

     (i) Income Taxes

         The Partnership is not subject to income taxes, consequently no
         provision for income taxes has been made. The Partnership files federal
         and state annual information tax returns, prepared on the accrual basis
         of accounting. Taxable income or loss is reportable by the partners
         individually.

     (j) Financial Statement Presentation

         The Partnership has determined that, for accounting purposes, the
         Leasing Agent Agreement is a lease, and the receivables, payables,
         gross revenues and operating expenses attributable to the containers
         managed by the Leasing Company are, for accounting purposes, those of
         the Leasing Company and not of the Partnership. Consequently, the
         Partnership's balance sheets and statements of operations display the
         payments to be received by the Partnership from the Leasing Company as
         the Partnership's receivables and revenues.


(2) Operating Segment

    The Financial Accounting Standards Board has issued SFAS No. 131,
    "Disclosures about Segments of an Enterprise and Related Information", which
    changes the way public business enterprises report financial and descriptive
    information about reportable operating segments. An operating segment is a
    component of an enterprise that engages in business activities from which it
    may earn revenues and incur expenses, whose operating results are regularly
    reviewed by the enterprise's chief operating decision maker to make
    decisions about resources to be allocated to the segment and assess its
    performance, and about which separate financial information is available.
    Management operates the Partnership's container fleet as a homogenous unit
    and has determined, after considering the requirements of SFAS No. 131, that
    as such it has a single reportable operating segment.




                                       24
<PAGE>   25
                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS


(2)  Operating Segment - (continued)

     The Partnership derives revenues from dry cargo containers and refrigerated
     containers. As of December 31, 1998, the Partnership operated 5,991
     twenty-foot, 3,153 forty-foot and 190 forty-foot high-cube marine dry cargo
     containers, as well as 100 twenty-foot and 50 forty-foot marine
     refrigerated cargo containers. A summary of gross lease revenue, by
     product, for the years ended December 31, 1998, 1997 and 1996 follows:

<TABLE>
<CAPTION>
                                  1998              1997              1996
                               ----------        ----------        ----------
<S>                            <C>               <C>               <C>       
Dry cargo containers           $4,388,558        $4,666,826        $5,476,680
Refrigerated containers           386,429           456,323           549,806
                               ----------        ----------        ----------

Total                          $4,774,987        $5,123,149        $6,026,486
                               ==========        ==========        ==========
</TABLE>

     Due to the Partnership's lack of information regarding the physical
     location of its fleet of containers when on lease in the global shipping
     trade, it is impracticable to provide the geographic area information
     required by SFAS No. 131. Any attempt to separate "foreign" operations from
     "domestic" operations would be dependent on definitions and assumptions
     that are so subjective as to render the information meaningless and
     potentially misleading.

     No single lessee contributed more than 10% of the rental revenue earned
     during 1998, 1997 and 1996.


(3)  Cash and Cash Equivalents

     Cash equivalents include highly-liquid investments with a maturity of three
     months or less on their acquisition date. Cash equivalents are carried at
     cost which approximates fair value. The Partnership maintains its cash and
     cash equivalents in accounts which, at times, may exceed federally insured
     limits. The Partnership has not experienced any losses in such accounts and
     believes it is not exposed to any significant credit risk. The Partnership
     places its cash equivalents in investment grade, short-term debt
     instruments and limits the amount of credit exposure with any one
     commercial issuer.


(4)  Organization Costs

     The Partnership incurred $703,234 in offering and organizational costs
     during its offering period. Amortization of these costs was $0 for 1998,
     $25,624 for 1997 and $140,647 for 1996.





                                       25
<PAGE>   26
                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS


(5)  Net Lease Receivables Due from Leasing Company

     Net lease receivables due from the Leasing Company are determined by
     deducting direct operating payables and accrued expenses, base management
     fees payable, and reimbursed administrative expenses payable to CCC and its
     affiliates from the rental billings payable by the Leasing Company to the
     Partnership under operating leases to ocean carriers for the containers
     owned by the Partnership. Net lease receivables at December 31, 1998 and
     December 31, 1997 were as follows:


<TABLE>
<CAPTION>
                                                     December 31,      December 31,
                                                         1998              1997
                                                      ----------        ----------
<S>                                                  <C>               <C>       
Lease receivables, net of doubtful accounts of
  $134,182 in 1998 and $83,363 in 1997                $1,124,544        $1,150,909
Less:
Direct operating payables and accrued expenses           354,547           335,684
Damage protection reserve (note 7)                       142,346           124,216
Base management fees                                     108,788           112,209
Reimbursed administrative expenses                        19,464            22,189
                                                      ----------        ----------
                                                      $  499,399        $  556,611
                                                      ==========        ==========
</TABLE>


(6)  Accrued Expenses

     Accrued expenses consist of $75,000 for the expected cost of retrofitting
     the Partnership's refrigerated containers with non-CFC refrigerants.


(7)  Damage Protection Plan

     The Leasing Company offers a repair service to several lessees of the
     Partnership's containers, whereby the lessee pays an additional rental fee
     for the convenience of having the Partnership incur the repair expense for
     containers damaged while on lease. This fee is recorded as revenue when
     earned according to the terms of the rental contract. A reserve has been
     established to provide for the estimated costs incurred by this service.
     This reserve is a component of net lease receivables due from the Leasing
     Company (see note 5). The Partnership is not responsible in the event
     repair costs exceed predetermined limits, or for repairs that are required
     for damages not defined by the damage protection plan agreement.





                                       26
<PAGE>   27

                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS


(8)  Net Lease Revenue

     Net lease revenue is determined by deducting direct operating expenses,
     base management fees and reimbursed administrative expenses to CCC and its
     affiliates from the rental revenue billed by the Leasing Company under
     operating leases to ocean carriers for the containers owned by the
     Partnership. Net lease revenue for the years ended December 31, 1998, 1997
     and 1996, was as follows:


<TABLE>
<CAPTION>
                                                      1998              1997              1996
                                                   ----------        ----------        ----------
<S>                                                <C>               <C>               <C>       
Rental revenue (note 2)                            $4,774,987        $5,123,149        $6,026,486
Less:
Rental equipment operating expenses                 1,290,468         1,385,415         1,503,339
Base management fees (note 9)                         322,402           354,579           411,235
Reimbursed administrative expenses (note 9)           301,831           276,647           330,290
                                                   ----------        ----------        ----------
                                                   $2,860,286        $3,106,508        $3,781,622
                                                   ==========        ==========        ==========
</TABLE>


(9)  Compensation to General Partner and its Affiliates

     Base management fees are equal to 7% of gross lease revenues attributable
     to operating leases pursuant to Section 4.3 of the Partnership Agreement.
     Reimbursed administrative expenses are equal to the costs expended by CCC
     and its affiliates for services necessary to the prudent operation of the
     Partnership pursuant to Section 4.4 of the Partnership Agreement. The
     following compensation was paid or will be paid by the Partnership to CCC
     or its affiliates:

<TABLE>
<CAPTION>
                                            1998            1997            1996
                                          --------        --------        --------
<S>                                       <C>             <C>             <C>     
Base management fees                      $322,402        $354,579        $411,235
Reimbursed administrative expenses         301,831         276,647         330,290
Acquisition fees                                --          15,679           5,298
                                          --------        --------        --------
                                          $624,233        $646,905        $746,823
                                          ========        ========        ========
</TABLE>


(10) Limited Partners' Capital

     The limited partners' per unit share of capital at December 31, 1998, 1997
     and 1996 was $11, $12 and $14, respectively. This is calculated by dividing
     the limited partners' capital at the end of the year by 1,999,812, the
     total number of limited partnership units.



                                       27
<PAGE>   28

                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS


(11) Income Taxes

     The reconciliation of net earnings as reported in the statement of
     operations and as would be reported for federal tax purposes for the years
     ended December 31, 1998, 1997 and 1996 are as follows:


<TABLE>
<CAPTION>
                                                        1998               1997                1996
                                                    -----------        -----------         -----------
<S>                                                 <C>                <C>                 <C>        
Net earnings per statement of operations            $   655,187        $   950,404         $ 1,625,368
Depreciation for income tax purposes less
   than (in excess of) depreciation for
   financial statement purposes                       1,921,422         (1,598,396)         (3,871,495)
Gain on disposition of assets for tax
   purposes in excess of gain on
   disposition for financial statement
   purposes                                             480,101            233,494              36,659
Amortization expense for tax purposes less
   than amortization for financial
   statement purposes                                        --             25,624             140,646
Bad debt expense for tax purposes less than
   (in excess of) bad debt expense for
   financial statement purposes                          50,819            (82,655)            (26,439)
                                                    -----------        -----------         -----------
Net earnings (loss) for federal tax purposes        $ 3,107,529        $  (471,529)        $(2,095,261)
                                                    ===========        ===========         ===========
</TABLE>

     At December 31, 1998, the tax basis of total partners' capital was
$7,249,251.


(12) The Cronos Group

     As reported in the Partnership's Current Report on Form 8-K and Amendment
     No. 1 to Current Report on Form 8-K, filed with the Commission on February
     7, 1997 and February 26, 1997, respectively, Arthur Andersen, London,
     England, resigned as auditors of The Cronos Group, (the "Parent Company"),
     on February 3, 1997.

     The Parent Company is the indirect corporate parent of CCC, the general
     partner of the Partnership. In its letter of resignation to the Parent
     Company, Arthur Andersen stated that it resigned as auditors of the Parent
     Company and all other entities affiliated with the Parent Company. While
     its letter of resignation was not addressed to CCC, Arthur Andersen
     confirmed to CCC that its resignation as auditors of the entities referred
     to in its letter of resignation included its resignation as auditors of CCC
     and the Partnership.

     CCC does not believe, based upon the information currently available to it,
     that Arthur Andersen's resignation was triggered by any concern over the
     accounting policies and procedures followed by the Partnership.

     Arthur Andersen's reports on the financial statements of CCC and the
     Partnership, for years preceding 1996, had not contained an adverse opinion
     or a disclaimer of opinion, nor were any such reports qualified or modified
     as to uncertainty, audit scope, or accounting principles.

     During the Partnership's fiscal year ended December 31, 1995 and the
     subsequent interim period preceding Arthur Andersen's resignation, there
     were no disagreements between CCC or the Partnership and Arthur Andersen on
     any matter of accounting principles or practices, financial statement
     disclosure, or auditing scope or procedure.




                                       28
<PAGE>   29
                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS

(12) The Cronos Group - (continued)

     In connection with its resignation, Arthur Andersen also prepared a report
     pursuant to the provisions of Section 10A(b)(2) of the Securities Exchange
     Act of 1934, as amended, for filing by the Parent Company with the
     Securities and Exchange Commission (the "SEC"). Following the report of
     Arthur Andersen, the SEC, on February 10, 1997, commenced a private
     investigation of the Parent Company for the purpose of investigating the
     matters discussed in such report and related matters. The Partnership does
     not believe that the focus of the SEC's investigation is upon the
     Partnership or CCC. CCC is unable to predict the outcome of the SEC's
     ongoing private investigation of the Parent Company.

     In 1993, the Parent Company negotiated a credit facility (hereinafter, the
     "Credit Facility") with several banks for the use by the Parent Company and
     its subsidiaries, including CCC. At December 31, 1996, approximately
     $73,500,000 in principal indebtedness was outstanding under the Credit
     Facility. As a party to the Credit Facility, CCC is jointly and severally
     liable for the repayment of all principal and interest owed under the
     Credit Facility. The obligations of CCC, and the five other subsidiaries of
     the Parent Company that are borrowers under the Credit Facility, are
     guaranteed by the Parent Company.

     Following negotiations in 1997 with the banks providing the Credit
     Facility, an Amended and Restated Credit Agreement was executed in June
     1997, subject to various actions being taken by the Parent Company and its
     subsidiaries, primarily relating to the provision of additional collateral.
     This Agreement was further amended in July 1997 and the provisions of the
     Agreement and its Amendment converted the facility to a term loan, payable
     in installments, with a final maturity date of May 31, 1998. The terms of
     the Agreement and its Amendment also provided for additional security over
     shares in the subsidiary of the Parent Company that owns the head office of
     the Parent Company's container leasing operations. They also provided for
     the loans to the former Chairman of $5,900,000 and $3,700,000 to be
     restructured as obligations of the former Chairman to another subsidiary of
     the Parent Company (not CCC), together with the pledge to this subsidiary
     company of 2,030,303 Common Shares beneficially owned by him in the Parent
     Company as security for these loans. They further provided for the
     assignment of these loans to the lending banks, together with the pledge of
     1,000,000 shares and the assignment of the rights of the Parent Company in
     respect of the other 1,030,303 shares. Additionally, CCC granted the
     lending banks a security interest in the fees to which it is entitled for
     the services it renders to the container leasing partnerships of which it
     acts as general partner, including its fee income payable by the
     Registrant. The Parent Company did not repay the Credit Facility at the
     amended maturity date of May 31, 1998.

     On June 30, 1998, the Parent Company entered into a third amendment (the
     "Third Amendment") to the Credit Facility. Under the Third Amendment, the
     remaining principal amount of $36,800,000 was to be amortized in varying
     monthly amounts commencing on July 31, 1998 with $26,950,000 due on
     September 30, 1998 and a final maturity date of January 8, 1999. The Parent
     Company did not repay the amounts due on September 30, 1998 and January 8,
     1999. The balance outstanding on the Credit Facility at December 31, 1998
     was $33,110,000.

     In March 1999, the Parent Company agreed to a proposal to extend the Credit
     Facility until September 30, 1999 and expects that a fourth amendment (the
     "Fourth Amendment"), with a final maturity date of September 30, 1999, will
     be signed in April 1999.




                                       29
<PAGE>   30
                            IEA INCOME FUND XI, L.P.

                          NOTES TO FINANCIAL STATEMENTS



(12) The Cronos Group - (continued)

     The directors of the Parent Company also are pursuing alternative sources
     of financing to meet the amended repayment obligations anticipated under
     the Fourth Amendment. Failure to meet revised lending terms would
     constitute an event of default with the lenders. The declaration of an
     event of default would result in further defaults with other lenders under
     loan agreement cross-default provisions. Should a default of the term loans
     be enforced, the Parent Company and CCC may be unable to continue as going
     concerns.

     The Partnership is not a borrower under the Credit Facility, and neither
     the containers nor the other assets of the Partnership have been pledged as
     collateral under the Credit Facility.

     CCC is unable to determine the impact, if any, these issues may have on the
     future operating results, financial condition and cash flows of the
     Partnership or CCC and on the Leasing Company's ability to manage the
     Partnership's fleet in subsequent periods.






                                       30
<PAGE>   31
                            IEA INCOME FUND XI, L.P.

                 SCHEDULE OF REIMBURSED ADMINISTRATIVE EXPENSES
                       PURSUANT TO ARTICLE IV SECTION 4.4
                          OF THE PARTNERSHIP AGREEMENT

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                  1998            1997            1996
                                                --------        --------        --------
<S>                                             <C>             <C>             <C>     
Salaries                                        $143,727        $127,598        $157,490
Other payroll related expenses                    24,846          23,518          27,308
General and administrative expenses              133,258         125,531         145,491
                                                --------        --------        --------
Total reimbursed administrative expenses        $301,831        $276,647        $330,289
                                                ========        ========        ========
</TABLE>



                                       31
<PAGE>   32

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

   As reported in the Registrant's Current Report on Form 8-K and Amendment No.
1 to Current Report on Form 8-K, filed with the Commission on February 7, 1997
and February 26, 1997, respectively, Arthur Andersen, London, England, resigned
as auditors of The Cronos Group, the Parent Company, on February 3, 1997.

   The Parent Company is the indirect corporate parent of CCC, the general
partner of the Registrant. In its letter of resignation to the Parent Company,
Arthur Andersen stated that it resigned as auditors of the Parent Company and
all other entities affiliated with the Parent Company. While its letter of
resignation was not addressed to CCC, Arthur Andersen confirmed to CCC that its
resignation as auditors of the entities referred to in its letter of resignation
included its resignation as auditors of CCC and the Registrant.

   CCC does not believe, based upon the information currently available to it,
that Arthur Andersen's resignation was triggered by any concern over the
accounting policies and procedures followed by the Registrant.

   Arthur Andersen's reports on the financial statements of CCC and the
Registrant, for years preceding 1996, had not contained an adverse opinion or a
disclaimer of opinion, nor were any such reports qualified or modified as to
uncertainty, audit scope, or accounting principles.

   During the Registrant's fiscal year ended December 31, 1995 and the
subsequent interim period preceding Arthur Andersen's resignation, there were no
disagreements between CCC or the Registrant and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.

   The Registrant retained a new auditor, Moore Stephens, P.C., on April 10,
1997, as reported in its Current Report on Form 8-K, filed April 14, 1997.

   In connection with its resignation, Arthur Andersen also prepared a report
pursuant to the provisions of Section 10A(b)(2) of the Securities Exchange Act
of 1934, as amended, for filing by the Parent Company with the Securities and
Exchange Commission (the "SEC"). Following the report of Arthur Andersen, the
SEC, on February 10, 1997, commenced a private investigation of the Parent
Company for the purpose of investigating the matters discussed in such report
and related matters. The Registrant does not believe that the focus of the SEC's
investigation is upon the Registrant or CCC. CCC is unable to predict the
outcome of the SEC's ongoing private investigation of the Parent Company.





                                       32
<PAGE>   33

                                    PART III


Item 10. Directors and Executive Officers of the Registrant

   The Registrant, as such, has no officers or directors, but is managed by CCC,
the general partner. The officers and directors of CCC at March 31, 1999 are as
follows:

<TABLE>
<CAPTION>
            Name                                      Office
            ----                                      ------
<S>                             <C>
Dennis J. Tietz                 President, Chief Executive Officer, and Director
Peter J. Younger                Treasurer, Principal Accounting Officer, and
                                Director
Elinor A. Wexler                Vice President/Administration and Secretary,
                                and Director
John P. McDonald                Vice President/Sales, and Director
</TABLE>

   DENNIS J. TIETZ Mr. Tietz, 46, as President and Chief Executive Officer, is
responsible for the general management of CCC. Mr. Tietz was elected Chief
Executive Officer of The Cronos Group, parent company of CCC, in December 1998.
Mr. Tietz is also President and a director of Cronos Securities Corp. From 1986
until August 1992, Mr. Tietz was responsible for the organization, marketing and
after-market support of CCC's investment programs. Mr. Tietz was a regional
manager for CCC, responsible for various container leasing activities in the
U.S. and Europe from 1981 to 1986. Prior to joining CCC in December 1981, Mr.
Tietz was employed by Trans Ocean Leasing Corporation as Regional Manager based
in Houston, with responsibility for all leasing and operational activities in
the U.S. Gulf.

   Mr. Tietz holds a B.S. degree in Business Administration from San Jose State
University and is a Registered Securities Principal with the NASD.

   PETER J. YOUNGER Mr. Younger, 42, was elected Treasurer and Principal
Accounting Officer in 1998. Mr. Younger joined the Board of Directors of CCC in
June 1997. See key management personnel of the Leasing Company for further
information.

   ELINOR A. WEXLER Ms. Wexler, 50, was elected Vice President - Administration
and Secretary of CCC in August 1992. Ms. Wexler joined the Board of Directors of
CCC in June 1997. Ms. Wexler has been employed by the General Partner since
1987, and is responsible for investor services, compliance and securities
registration. From 1983 to 1987, Ms. Wexler was Manager of Investor Services for
The Robert A. McNeil Corporation, a real estate syndication company, in San
Mateo, California. From 1971 to 1983, Ms. Wexler held various positions,
including securities trader and international research editor, with Nikko
Securities Co., International, based in San Francisco.

   Ms. Wexler attended the University of Oregon, Portland State University and
the Hebrew University of Jerusalem, Israel. Ms. Wexler is also Vice President
and Secretary of Cronos Securities Corp. and a Registered Principal with the
NASD.

   JOHN P. MCDONALD Mr. McDonald, 38, was elected Vice President - National
Sales Manager of CCC in August 1992, with responsibility for marketing CCC's
investment programs. Mr. McDonald joined the Board of Directors of CCC in
October 1997. Since 1988, Mr. McDonald had been Regional Marketing Manager for
the Southwestern U.S. From 1983 to 1988, Mr. McDonald held a number of container
leasing positions with CCC, the most recent of which was as Area Manager for
Belgium and the Netherlands, based in Antwerp.

   Mr. McDonald holds a B.S. degree in Business Administration from Bryant
College, Rhode Island. Mr. McDonald is also a Vice President of Cronos
Securities Corp.




                                       33
<PAGE>   34

   The key management personnel of the Leasing Company at March 31, 1999, were
as follows:

<TABLE>
<CAPTION>
          Name                                  Title
          ----                                  -----
<S>                          <C>
Steve Brocato                President
Peter J. Younger             Vice President/Chief Financial Officer
John M. Foy                  Vice President/Americas
Nico Sciacovelli             Vice President/Europe, Middle East and
                                            Africa
Harris H. T. Ho              Vice President/Asia Pacific
David Heather                Vice President/Technical Services
John C. Kirby                Vice President/Operations
J. Gordon Steel              Vice President/Tank Container Division
</TABLE>

   STEVE BROCATO Mr. Brocato, 46, was elected President of the Leasing Company's
container division in June 1997, and is based in the United Kingdom. Mr. Brocato
has held various positions since joining Cronos including, Vice President -
Corporate Affairs and Director of Marketing - Refrigerated Containers for Cronos
in North and South America. Prior to joining Cronos, Mr. Brocato was a Vice
President for ICCU Containers from 1983 to 1985 and was responsible for dry
cargo container marketing and operations for the Americas. From 1981 to 1983, he
was Regional Manager for Trans Ocean Leasing Ltd.

   PETER J. YOUNGER Mr. Younger, 42, was elected Chief Financial Officer of The
Cronos Group in March, 1997, and is based in the United Kingdom. Mr. Younger was
appointed Vice President and Controller of Cronos in 1991. He joined IEA in 1987
and served as Director of Accounting and the Vice President and Controller,
based in San Francisco. Prior to 1987, Mr. Younger was a certified public
accountant and a principal with the accounting firm of Johnson, Glaze and Co. in
Salem, Oregon. Mr. Younger holds a B.S. degree in Business Administration from
Western Baptist College.

   JOHN M. FOY Mr. Foy, 53, is directly responsible for the Leasing Company's
lease marketing and operations in North America, Central America, and South
America, and is based in San Francisco. From 1985 to 1993, Mr. Foy was Vice
President/Pacific with responsibility for dry cargo container lease marketing
and operations in the Pacific Basin. From 1977 to 1985 Mr. Foy was Vice
President of Marketing for Nautilus Leasing Services in San Francisco with
responsibility for worldwide leasing activities. From 1974 to 1977, Mr. Foy was
Regional Manager for Flexi-Van Leasing, a container lessor, with responsibility
for container leasing activities in the Western United States. Mr. Foy holds a
B.A. degree in Political Science from University of the Pacific, and a Bachelor
of Foreign Trade from Thunderbird Graduate School of International Management.

   NICO SCIACOVELLI Mr. Sciacovelli, 49, was elected Vice President - Europe,
Middle East and Africa in June 1997. Mr. Sciacovelli is directly responsible for
the Leasing Company's lease marketing and operations in Europe, the Middle East
and Africa and is based in Italy. Since joining Cronos in 1983, Mr. Sciacovelli
served as Area Director and Area Manager for Southern Europe. Prior to joining
Cronos, Mr. Sciacovelli was a Sales Manager at Interpool Ltd.

   HARRIS H. T. HO Mr. Ho, 41, was elected Vice President - Asia Pacific in June
1997. Mr. Ho is directly responsible for the Leasing Company's lease marketing
and operations in Asia, Australia and the Indian sub-continent and is based in
Hong Kong. Since joining Cronos in 1990, Mr. Ho served as Area Director, Hong
Kong and China. Prior to joining Cronos, Mr. Ho was a Manager at Sea Containers
Pacific Ltd and Sea Containers Hong Kong Limited from 1981 to 1990, responsible
for container marketing within Asia. From 1978 to 1981, Mr. Ho was Senior
Equipment Controller for Hong Kong Container Line. Mr. Ho holds a Diploma of
Management Studies in Marketing from The Hong Kong Polytechnic and The Hong Kong
Management Association.




                                       34
<PAGE>   35

   DAVID HEATHER Mr. Heather, 51, is responsible for all technical and
engineering activities of the fleet managed by the Leasing Company. Mr. Heather
was Technical Director for LPI, based in the United Kingdom, from 1986 to 1991.
From 1980 to 1986, Mr. Heather was employed by ABC Containerline NV as Technical
Manager with technical responsibility for the shipping line's fleet of dry
cargo, refrigerated and other specialized container equipment. From 1974 to
1980, Mr. Heather was Technical Supervisor for ACT Services Ltd., a shipping
line, with responsibility for technical activities related to refrigerated
containers. Mr. Heather holds a Marine Engineering Certificate from Riversdale
Marine Technical College in England.

   JOHN C. KIRBY Mr. Kirby, 45, is responsible for container purchasing,
contract and billing administration, container repairs and leasing-related
systems, and is based in the United Kingdom. Mr. Kirby joined CCC in 1985 as
European Technical Manager and advanced to Director of European Operations in
1986, a position he held with CCC, and later the Leasing Company, until his
promotion to Vice President/Operations of the Leasing Company in 1992. From 1982
to 1985, Mr. Kirby was employed by CLOU Containers, a container leasing company,
as Technical Manager based in Hamburg, Germany. Mr. Kirby acquired a
professional engineering qualification from the Mid-Essex Technical College in
England.

   J. GORDON STEEL Mr. Steel, 66, is directly responsible for the overall lease
marketing activity for the Leasing Company's Tank Container Division. From 1990
to 1992, Mr. Steel held the position of Director/General Manager for Tiphook
Container's Tank Division. From 1977 to 1990, Mr. Steel held various managerial
positions, involving manufacturing and transportation of hazardous materials,
with Laporte Industries and ICI, major chemical distribution companies. Mr.
Steel is a qualified Chemical Engineer and attended the Associate Royal
Technical College in Scotland.




                                       35
<PAGE>   36

Item 11. Executive Compensation

   Beginning with the first quarter of 1991, the Registrant commenced monthly
distributions to its partners (general and limited) from distributable cash from
operations, allocated 95% to the limited partners and 5% to the general partner.
Sales proceeds are allocated 99% to the limited partners and 1% to the general
partner. These allocations remain in effect until such time as the limited
partners have received from the Registrant aggregate distributions in an amount
equal to their capital contributions plus a 10% cumulative, compounded (daily),
annual return on their adjusted capital contributions. Thereafter, all
Partnership distributions will be allocated 85% to the limited partners and 15%
to the general partner.

   The Registrant will not pay or reimburse CCC or the Leasing Company for any
remuneration payable by them to their executive officers, directors or any other
controlling persons. However, the Registrant will reimburse the general partner
and the Leasing Company for certain services pursuant to Section 4.4 of the
Partnership Agreement. These services include but are not limited to (i)
salaries and related salary expenses for services which could be performed
directly for the Registrant by independent parties, such as legal, accounting,
transfer agent, data processing, operations, communications, duplicating and
other such services; (ii) performing administrative services necessary to the
prudent operations of the Registrant.

   The following table sets forth the fees the Registrant paid (on a cash basis)
to CCC or the Leasing Company ("CCL") for the year ended December 31, 1998.


<TABLE>
<CAPTION>
                                                                                      Cash Fees and
                 Name                             Description                         Distributions
                 ----                             -----------                         -------------
<S>                             <C>                                                   <C>
  1)                            Base management fees - equal to 7% of gross
                                lease revenues attributable to operating leases
                                pursuant to Section 4.3 of the Limited
                                Partnership Agreement                             
                 CCL                                                                    $325,822

  2)                            Reimbursed administrative expenses - equal to
                                the costs expended by CCC and its affiliates for
                                services necessary to the prudent operation of
                                the Registrant pursuant to Section 4.4 of
                                the Limited Partnership Agreement                        
                 CCC                                                                    $ 22,026

                 CCL                                                                    $282,530

  3)                            Interest  in  Fund  -  5%  of  distributions  of
                                distributable  cash for any quarter  pursuant to
                                Section 6.1 of the Limited Partnership Agreement
                 CCC                                                                    $156,292
</TABLE>




                                       36
<PAGE>   37

Item 12.       Security Ownership of Certain Beneficial Owners and Management

   (a)  Security Ownership of Certain Beneficial Owners

   There is no person or "group" of persons known to the management of CCC to be
the beneficial owner of more than five percent of the outstanding units of
limited partnership interests of the Registrant.

   (b)  Security Ownership of Management

   The Registrant has no directors or officers. It is managed by CCC. CCC owns
6,791 units, representing 0.34% of the total amount of units outstanding.

   (c)  Changes in Control

   Inapplicable.


Item 13. Certain Relationships and Related Transactions

   (a)  Transactions with Management and Others

   The Registrant's only transactions with management and other related parties
during 1998 were limited to those fees paid or amounts committed to be paid (on
an annual basis) to CCC, the general partner, and its affiliates. See Item 11,
"Executive Compensation," herein.

   (b)  Certain Business Relationships

   Inapplicable.

   (c)  Indebtedness of Management

   Inapplicable.

   (d)  Transactions with Promoters

   Inapplicable.




                                       37
<PAGE>   38

                                     PART IV


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

   (a)1. Financial Statements

   The following financial statements of the Registrant are included in Part II,
Item 8:

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
        Report of Independent Public Accountants................................................17


        Balance Sheets - December 31, 1998 and 1997.............................................18


        Statements of Operations - for the years ended December 31, 1998, 1997 and 1996.........19


        Statements of Partners' Capital - for the years ended December 31, 1998, 1997 and 1996..20


        Statements of Cash Flows - for the years ended December 31, 1998, 1997 and 1996.........21


        Notes to Financial Statements...........................................................22


        Schedule of Reimbursed Administrative Expenses - for the years ended December 31, 1998,
        1997 and 1996...........................................................................31
</TABLE>


   All other schedules are omitted as the information is not required or the
information is included in the financial statements or notes thereto.




                                       38
<PAGE>   39

   (a)3. Exhibits


<TABLE>
<CAPTION>
            Exhibit
              No.                       Description                         Method of Filing
              ---                       -----------                         ----------------
<S>                    <C>                                                  <C>
             3(a)      Limited Partnership  Agreement of the Registrant,    *
                       amended and restated as of December 14, 1990

             3(b)      Certificate   of  Limited   Partnership   of  the    **
                       Registrant

             10(a)     Form of Leasing Agent  Agreement with LPI Leasing    ***
                       Partners International N.V.

             10(b)     Assignment  of  Leasing  Agent   Agreement  dated    Filed with this
                       January  1,  1992  between  the  Registrant,  CCC    document
                       (formerly   Intermodal   Equipment   Associates),
                       Cronos  Containers  N.V.  (formerly  LPI  Leasing
                       Partners    International    N.V.)   and   Cronos
                       Containers Limited

             27        Financial Data Schedule                              Filed with this
                                                                            document
</TABLE>


   (b)  Reports on Form 8-K

        No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1998.

-----------------

   *  Incorporated by reference to Exhibit "A" to the Prospectus of the
      Registrant dated December 14, 1990, included as part of Registration
      Statement on Form S-1 (No. 33-36701)

   ** Incorporated by reference to Exhibit 3.2 to the Registration Statement on
      Form S-1 (No. 33-36701)

  *** Incorporated by reference to Exhibit 10.2 to the Registration Statement
      on Form S-1 (No. 33-36701)



                                       39
<PAGE>   40

                                   SIGNATURES



        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                     IEA INCOME FUND XI, L.P.


                                     By   Cronos Capital Corp.
                                          The General Partner


                                     By    /s/  Dennis J. Tietz       
                                          --------------------------------------
                                          Dennis J. Tietz
                                          President and Director of Cronos 
                                          Capital Corp. ("CCC") Principal 
                                          Executive Officer of CCC




Date: March 31, 1999


   Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cronos
Capital Corp., the managing general partner of the Registrant, in the capacities
and on the dates indicated:

<TABLE>
<CAPTION>
          Signature                             Title                            Date
          ---------                             -----                            ----
<S>                                  <C>                                    <C>
                                     President and Director of
 /s/  Dennis J. Tietz                   Cronos Capital Corp.                March 31, 1999
--------------------------              ("CCC") (Principal
Dennis J. Tietz                       Executive Officer of CCC)

                                       Treasurer and Director
 /s/  Peter Younger                    of Cronos Capital Corp.              March 31, 1999
--------------------------              ("CCC") (Principal
Peter Younger                         Financial and Accounting
                                           Officer of CCC)

                                       National Sales Manager
 /s/  John McDonald                        and Director of                  March 31, 1999
--------------------------              Cronos Capital Corp.
John McDonald                           
</TABLE>

                            SUPPLEMENTAL INFORMATION

   The Registrant's annual report will be furnished to its limited partners on
or about April 30, 1999. Copies of the annual report will be concurrently
furnished to the Commission for information purposes only, and shall not be
deemed to be filed with the Commission.



<PAGE>   41
                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
            Exhibit
              No.                       Description                         Method of Filing
              ---                       -----------                         ----------------
<S>                    <C>                                                  <C>
             3(a)      Limited Partnership  Agreement of the Registrant,    *
                       amended and restated as of December 14, 1990

             3(b)      Certificate   of  Limited   Partnership   of  the    **
                       Registrant

             10(a)     Form of Leasing Agent  Agreement with LPI Leasing    ***
                       Partners International N.V.

             10(b)     Assignment  of  Leasing  Agent   Agreement  dated    Filed with this
                       January  1,  1992  between  the  Registrant,  CCC    document
                       (formerly   Intermodal   Equipment   Associates),
                       Cronos  Containers  N.V.  (formerly  LPI  Leasing
                       Partners    International    N.V.)   and   Cronos
                       Containers Limited

             27        Financial Data Schedule                              Filed with this
                                                                            document
</TABLE>



-------------

  *   Incorporated by reference to Exhibit "A" to the Prospectus of the
      Registrant dated December 14, 1990, included as part of Registration
      Statement on Form S-1 (No. 33-36701)

  **  Incorporated by reference to Exhibit 3.2 to the Registration Statement on
      Form S-1 (No. 33-36701)

  *** Incorporated by reference to Exhibit 10.2 to the Registration Statement
      on Form S-1 (No. 33-36701)